United States

European Stocks Struggle for Direction After Hitting Record Highs

Source: NYSE
  • European markets are taking a breather after hitting record highs on Tuesday.
  • In the autos sector, Stellantis shares climbed 3.7% on news of a software tie-up with Amazon.
  • Investors are closely monitoring interest rates in the bond market.

LONDON — European stocks struggled for direction Wednesday following a record rally in the previous session as global investors kept an eye on U.S. bond yield movements.

The pan-European Stoxx 600 index provisionally closed slightly above the flatline, with sectors and bourses pointing in different directions. Automakers were the top performers, climbing 2.4%, with the likes of Renault, Daimler and Stellantis leading gains for the sector.

Stellantis got a boost from news that Amazon will partner with the company to develop cars and trucks with the U.S. tech giant's software. Shares of Stellantis climbed 3.8%.

At the opposite end of the Stoxx 600 was Oxford Nano, which sank 4.9%.

Rising bond yields

European markets are taking a breather after hitting record highs on Tuesday. The pan-European benchmark reached an intraday record of 495.41.

Stocks in Asia-Pacific were broadly negative overnight. Investors are closely monitoring interest rates in the bond market, with U.S. Treasury yields rising at the fastest new year pace in two decades.

The benchmark 10-year U.S. Treasury yield rose to as high as 1.71% on Tuesday. It was slightly lower on Thursday, though, last trading at 1.6631%.

The 10-year yield is important since it influences lending rates for mortgages and many other business and consumer loans. When bonds sell off, yields, or interest rates, go higher.

Investors are waiting for the release of the Federal Reserve's minutes from its December meeting on Thursday. The central bank announced last month that it would speed up the tapering of its bond buying program and also forecast three interest rate hikes for 2022.

Meanwhile, U.S. stocks were similarly mixed Wednesday, a day after the Dow Jones Industrial Average notched a record close.

On the data front, new PMI (purchasing managers' index) data showed the euro zone's economy slowing in December amid surging Covid cases. The IHS Markit euro zone composite PMI came in at 53.3 last month, down from 55.4 in November.

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— CNBC's Ryan Browne, Yun Li, Patti Domm and Eustance Huang contributed to this market report.

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